Revised: 2 September 2004 What is CFA Institute? Global nonprofit association with more than 150,000 investment-professional constituents from 135 nations around the world. Headquartered in Charlottesville, VA, USA – CFA Institute also maintains offices in London & Hong Kong. CFA Institute sets industry standards for knowledge, professionalism, & integrity through the (Chartered Financial Analyst ® ) CFA ® Program CFA Institute and 129 local CFA Institute societies provide ongoing career development for members through continuing education, advocacy, and professional conduct programs. Ethical and professional standards – the CFA Institute Code of Ethics and Standards of Professional Conduct, and GIPS ® (Global Investment Performance Standards) – foster high levels of integrity and transparency within the investment management process.
CFA Institute sponsors the Chartered Financial Analyst (CFA) Program. Growth in world financial markets has created an unprecedented demand for investment practitioners. This demand has clearly established the importance of a globally accepted standard with which employers and investors can validate the knowledge, integrity, and professionalism of investment managers and financial analysts. That standard is the Chartered Financial Analyst (CFA) Program. The CFA Program’s rigorous curriculum, three levels of examination, and work-experience requirements make the CFA charter perhaps the most recognized achievement within the global investment industry. Those who have demonstrated the commitment to learning and ethical behavior that the CFA charter entails, receive the ultimate degree of respect from their peers, employers, and clients.
The CFA Program is a distance-learning program, based on a specific curriculum of reading assignments. The format of this self-study curriculum allows even the busiest investment professional to participate. The curriculum develops and reinforces a fundamental knowledge of investment principles. The three levels of examination verify a candidate’s ability to apply these principles across all areas of the investment decision making process, and the Program’s professional conduct requirements demand that both CFA candidates and charterholders answer to the highest standards of ethical responsibility. Graduate students (and undergraduates who will receive their bachelor’s degree by December of the exam year) are also encouraged to begin the CFA Program if they wish to pursue a career in investments.
The CFA Program is divided into three levels, each culminating in an examination. Level I is offered twice each year (June & December). Levels II & III are offered only at the June administration. Candidates must pass each level sequentially. The candidate begins with Level I, an objective exam that focuses on Fundamental Concepts & Tools for Investment Valuation and Management. Level II, also an objective exam, focuses primarily on asset valuation while Level III, emphasizes portfolio management. The format of the Level III examination is 50% essay and 50% item set. The Study Program at Levels II and III builds on what was learned at prior levels. The competence level rises for each of the examinations. At Level I emphasis is on basic skill and knowledge. Levels II and III involve higher order learning skills, such as analysis and synthesis. In keeping with the CFA Institute mission, Ethical and Professional Standards are emphasized at every level.
The CFA Program is relevant to the investment profession because the Body of Knowledge is based on the continual feedback from practicing investment professionals & leading finance academics. The entire process begins with a detailed job analysis performed every five years in which thousands of analysts and portfolio managers participate to develop a list of core topics for the program, i.e., the CFA Candidate Body of Knowledge (CBOK).
The Job Analysis is the foundation on which the CFA Program is built. It involves thousands of practitioners from around the globe in determining: “What does an entry level practitioner need to know?” Regional expert panels made up of charterholder practitioners identify the topics to be covered in the CFA Program. The results of the regional expert panels and the member surveys are used to determine the Candidate Body of Knowledge or CBOK.
Built on a broad-based Body of Knowledge, the CFA Program is intended to supplement the education and work experience of investment professionals. The study curriculum covers the fundamentals of financial analysis and investment decision making. The CFA Program helps practitioners build the knowledge base required to make better investment decisions, and more viable candidates to assume senior positions with wider ranges of responsibility.
No other designation within the investment management profession carries as much prestige as the CFA charter. The list of individuals who have completed the program reads like a Who’s Who of the global investment industry and includes CEOs and partners of the top investment firms, world renowned investment strategists, and leading academics. Achieving the CFA designation places a individual in select company. It carries with it the respect and credibility that will benefit the professional at every career stage.
Traditional employment in large financial institutions continues to be a primary career track for many CFA candidates and charterholders. However, growing numbers of charterholders are working in non-financial corporations and consulting firms.
The job listings in local newspapers and on the Internet contain a recurring requirement for investment–related positions: “CFA charter preferred or CFA candidate desired.” When hiring, promoting, and assigning additional responsibility, a large number of employers use the CFA charter as a benchmark for measuring capability and professionalism. Participation in the CFA Program is a clear signal to potential employers that a student or new employee is serious about a career in the investment profession .
According to our most recent salary survey, the CFA charter makes a financial difference. The 2003 survey of CFA Institute members found that: Investment professionals with more than ten years experience who hold a CFA charter earn an average of 25 percent more than non-charterholders with similar experience. Ninety-three-percent of those with CFA charters believe it expands career opportunities and advancement potential.
As I mentioned earlier, the CFA Program is continuing to grow in numbers and stature around the world. Strong growth in Asia and Europe has led the way to a much broader awareness of and value for the CFA Charter.
The CFA Program is growing around the world and transforming CFA Institute into a global organization. Currently the majority of CFA charterholders are living and working in North America, but the candidate population is much more diverse. More than half of all candidates in the CFA Program are outside the U.S., and we expect that within 10 years the majority of charterholders will be outside the U.S.
CFA Institute makes extensive efforts to ensure that the content of the CFA Program is relevant to investment professionals around the world. Candidates are expected to understand the investment concepts and principles that are common across markets, and cross international borders. CFA Institute engages professionals from around the world in the development and administration of the CFA Program to ensure a global perspective. Work on the Candidate Body of Knowledge, the curriculum, the examinations, and grading is conducted by a globally diverse body of investment practitioners and academics.
International recognition of the CFA Program gives employers and investors a globally relevant standard for measuring the competence and integrity of investment professionals. In turn, this recognition provides CFA charterholders with a competitive advantage when implementing global investment strategies or pursuing clients outside the country where they live. It also means employment opportunities for CFA candidates and charterholders are stronger in virtually every financial market.
The material covered in the CFA Program’s curriculum is designed to reflect a Body of Knowledge that keeps pace with the ever-changing dynamics of the global investment industry. The CFA Program focuses on the principles of investment analysis and management. The Body of Knowledge is a systematic way of setting a framework for making investment decisions. The Body of Knowledge includes the 10 general topic areas listed here. Each of these topic areas is broken into sub-topics and serves as the framework on which the entire program is constructed. CFA Institute publishes the CFA Program Study Guides that candidates receive upon enrolling in each level of the program. The study guides contain the reading assignments to teach the Body of Knowledge and on which the examinations are based. Level I focuses on the Investment Tools, Level II on Asset Valuation, and Level III on Portfolio Management. Ethical and Professional Standards are a cornerstone of each level.
The weightings for each Level shown here are approximate and may vary from year to year, but provide a clear idea of the emphasis at each Level. The Level I curriculum and examination focuses on tools and concepts that apply to investment valuation and management. Level I also provides an overview of the processes of asset valuation and portfolio management. Reflecting the typical “business core” at many colleges and universities, this Level includes strong emphasis on financial statement analysis, economics, and quantitative methods. Level II deals primarily with asset valuation. Candidates must be able to apply a variety of valuation models in analyzing and valuing specific equity, debt, and alternative investments. Level III has a clear emphasis on portfolio management. Candidates are required to demonstrate the ability to determine investor objectives and constraints. In addition, applying investment policy and capital-markets expectations to the asset allocation decision-making process is a key focus.
The CFA Program is a formidable challenge, requiring a significant commitment of time and energy. Like most professional achievements, the key to success is preparation. On average, each level of the program requires a minimum of 250- 300 hours of preparation. Much of the Level I material will be familiar to current business students and recent business school graduates. After enrolling, CFA candidates receive a Study Guide from CFA Institute. Each Study Guide is divided into 18 study sessions that list the required readings in each topic area and the Learning Outcome Statements for each reading. The program is designed to provide a clear set of objectives for candidates to achieve in building a broad understanding of the Body of Knowledge.
Reading assignments are the basis for examination questions. CFA Institute strongly advises candidates to purchase a copy of the assigned readings for their use, or to share with other candidates. The curriculum is updated annually to ensure relevance and timeliness. Material is drawn from textbooks, professional journal articles, monographs, and research reports. As interest in the CFA Program has grown, many colleges and universities have begun aligning their courses with the CFA Program curriculum. As a result, the assigned textbooks for Level I represent the core business texts in many business programs. This makes the transition from a business program to the CFA Program much smoother for many students and recent graduates.
The CFA Program is constructed to broaden and deepen the knowledge of the entire field of investment valuation and portfolio management. Many candidates hold highly specialized jobs and have professional experience in one or two disciplines. Thus, their knowledge and experience is limited in other areas of the Body of Knowledge. The candidates may need to develop some background knowledge of a particular topic before they begin studying the CFA curriculum in that area. For this reason, selected study sessions include preliminary readings that allow candidates to review and build an understanding of fundamental concepts before moving on to the more advanced coverage in the primary readings.
The exam formats have changed over the years. The program utilizes 100% multiple choice questions at Level I, 100% item sets at Level II, and a combination of essays/problems and items sets at Level III. Item sets are comprised of a case or vignette followed by six multiple choice questions each related to the case or vignette. They allow candidates to demonstrate a deeper understanding of the material than traditional multiple choice questions.
The number of candidates participating and the level of respect accorded CFA charterholders have both grown impressively. Likewise impressive is the large number of charterholders who give something back to the profession each year by serving as graders of the CFA examinations. In 2004, approximately 750 charterholders traveled to Charlottesville, Virginia, to work in the grading process. These charterholders are the key to a rigorous grading process which includes a comprehensive evaluation of every exam. Graders are assigned to teams with each team grading one question or part of a question across all the exams. Designed to provide every paper with a fair and equal review, the process holds each exam to a consistent standard. The entire process is supervised by the professional staff at CFA Institute and is reviewed annually by the CFA Institute Board of Governors.
More than 120,000 candidates have enrolled for the 2004 CFA Program, combining the June and December exam dates. The percentage of candidates passing the exams varies from year to year on each level. The pass rates have been variable over time. This slide shows the average pass rates for the entire life of the program and those for most recent exams. These pass rates are based on those candidates who actually took the exams and do not include no-shows. Typically about 20-25% of enrolled candidates don’t show up on exam day.
The key prerequisite for admission to the CFA Program is a bachelor’s degree or the equivalent. Undergraduate students must expect to receive a bachelor’s degree no later than 31 December of the exam year to enter the program. Exam results will not be released and will be voided if a candidate fails to graduate by the 31 December deadline. Based on recent data, approximately 66% of candidates hold a Bachelor’s degree while about 34% have earned advanced degrees. In 2004, over 8,000 students and 2,200 faculty members were enrolled in the CFA Program.
Candidates can register online or complete a paper application and submit it by mail to CFA Institute. The registration and enrollment package is available through the mail from CFA Institute or it can be downloaded/printed from the CFA Institute website. Candidates must complete the entire application form and enclose appropriate payment if they want to complete their enrollment on a timely basis. Early enrollment is encouraged because it allows the candidate a longer period for exam preparation. In addition, enrollment fees increase as the final deadline for registration approaches for each exam administration.
To earn the CFA designation, candidates must meet these requirements. Candidates may accumulate work experience while sitting for the exams and may sit for the exams without any prior work experience. Keys to appropriate work experience include spending a substantial portion of professional time working in the investment decision-making process and/or applying the various parts of investment knowledge in performing the job. No references are required to enter the program. References from employers, business associates, and/or professors are submitted after passing Level II. Prior to receiving a charter, candidates must become a member of CFA Institute and apply for membership in one of its member societies. Candidates who have completed Level I are eligible for full membership in CFA Institute and in most societies.
Local CFA Institute societies often invite candidates to their meetings and educational events. Non-members, particularly students and faculty from local universities, are generally welcomed. The caliber of the speakers and the educational value provided is typically very high. CFA Institute societies can also play an important role in candidates’ study efforts. Many local societies help to organize small study groups which can be a tremendous boost to any candidate’s preparation for the exams. Some societies also sponsor group preparation programs for candidates in their area including both extended study courses and short formal study seminars. Candidates can benefit by joining CFA Institute and a local society as soon as they complete the level I exam. Access to the network provided by the membership and ongoing continuing education opportunities can be a critical element in career enhancement. CFA Institute and individual CFA Institute member societies are hard at work to: provide excellent continuing education opportunities, maintain professional standards, advocate on important regulatory matters, build public awareness of the CFA charter and CFA Institute, and encourage membership in CFA Institute and a local society which provide members with a global network of investment professionals and an array of career-enhancing programs.
In considering the costs for the CFA Program candidates should include: registration and enrollment fees, textbooks, and other readings. The cost of Level I is approximately $1,430. Assistance in meeting these costs can come from two sources: CFA Institute Scholarship Programs and employers.
The deadlines for registering and enrolling in the CFA Program are shown here. Missed deadlines mean increased fees and, potentially, missing the exam altogether. Candidates enrolling early in the CFA Program also have a distinct advantage in exam preparation due to the extended length of study time. Enroll early and give yourself time to read and adequately prepare.
CFA Institute offers 3 scholarship programs to reduce costs for the CFA Program. These scholarships are available only for the June exam. There are currently no December scholarships. For each, registration fees are waived and the candidate pays only US$150 for enrollment. STUDENTS: CFA Institute offers student scholarships through qualified faculty. Students may NOT apply directly to CFA Institute for this program, but must be selected and sponsored by a qualified professor . Each professor is allocated 5 scholarships. The sponsoring professor must be full-time faculty and a CFA charterholder to participate. These scholarships apply to Level I ONLY. FACULTY: CFA Institute offers scholarships for full-time university professors enrolling in the CFA Program. Professors may be enrolled at any of the 3 levels of the CFA Program. P rofessors wishing to participate in the scholarship program should apply directly to the CFA Institute Scholarship Office. SOCIETY: Local CFA Institute Societies actively support the CFA Program and many organize small study groups and local review courses to assist in candidate preparation. Each local society is allocated 5 scholarships and many offer additional scholarships or other kinds of financial support to candidates. Societies may choose to award their scholarships to candidates at any of the 3 levels of the CFA Program. Applications must be made directly to the local society. Nearly 1,400 scholarships were awarded in 2004.
The deadlines for scholarships are shown here. Missed deadlines mean that the scholarships are forfeited. The materials must be received by the Scholarship office by the dates shown to qualify. Candidates who are applying for a scholarship should not wait for the scholarship to be approved before they register with CFA Institute. Candidates should proceed to register and enroll as regular candidates for the CFA exam at the earliest possible time, and then, if awarded a scholarship, CFA Institute will refund excess fees paid. This minimizes the candidate’s cost in the event a scholarship is not awarded.
For more information you can contact Info Central at CFA Institute. Just log on to the CFA Institute website or call one of the regional offices.
This brings my presentation to a close. Thank you for your attention. Are there any questions?
2004-2005 CFA ® PROGRAM Sponsored by:
Chartered Financial Analyst ® A Symbol of Integrity and Professional Excellence ®
What is the CFA Program? Rigorous Self-Study Program
What is the CFA Program? Three Levels and Three Exams Level I – Knowledge and comprehension of fundamental investment tools and concepts Level II – Application and analysis focused on asset valuation Level III – Synthesis and evaluation of client needs and portfolio management issues Ethical and professional standards are emphasized at every level.
What is the CFA Program? Practical, Relevant Education Practitioners at every step of the process
What is the CFA Program? Learning Tied to Current Practice • Determines topics taught in the CFA Program • Conducted every five years: next in 2005-2006 • Involves investment practitioners worldwide: Regional Expert Panels and member surveys • “ What knowledge and skills are needed by an investment professional?” • CBOK, curriculum, LOS and exams all based on what practitioners need to know
Benefits of the CFA Program Respect and Credibility Most common occupations of CFA charterholders • CEO/Principal • Investment Counselor • Chief Investment Officer • Investment Firm Manager • Equity Analyst • Portfolio Manager • Fixed Income Analyst • Portfolio Strategist • Investment Banker • Sales/Marketing Professional
Benefits of the CFA Program Diverse Career Opportunities Mutual Funds / Investment Companies 25% Brokerage / Investment Banks 19% Investment Management Counselors 14% Commercial Banks / Trust Companies 13% Consulting Firms 6% Insurance Companies 5% Other 18%
Benefits of the CFA Program Opportunity – Top 24 Employers • Bank of America • Mellon Financial Corporation • Barclays • Merrill Lynch & Co., Inc. • BMO Nesbitt Burns, Inc. • Morgan Stanley • CIBC World Markets • Northern Trust Corporation • Citigroup • PricewaterhouseCoopers • Credit Suisse Group • Prudential Financial • Deutsche Bank • Putnam Investments • Fidelity Investments • RBC Financial Group • Goldman Sachs • Scotia Capital • ING Groep N.V. • State Street • J.P. Morgan Chase & Co. • UBS AG • Lehman Brothers • Wellington Management
Benefits of the CFA Program Earning Power – The CFA Premium The CFA Premium: US$40,000 Median Total Compensation for CFA Institute members with 10+ years experience Source: 2003 Compensation Survey $163,000 $203,000
Global Passport: The CFA Charter Growing Non-US Numbers
Global Passport: The CFA Charter Members’ and Candidates’ Locations 68,378 Members and 129,389 Candidates Worldwide * United States & Canada Members: 52,058 Candidates: 65,726 Europe Members: 7,492 Candidates: 19,373 Asia & Mainland China Members: 610 Candidates: 6,899 Latin America Members: 457 Candidates: 2,125 Pacific Asia Members: 6,608 Candidates: 29,777 Africa & Middle East Members: 1,153 Candidates: 5,489 * as of December 2003
Global Passport: The CFA Charter Global Perspective
Global Passport: The CFA Charter International Recognition
The CFA Course of Study CFA Body of Knowledge ™ • Ethical and Professional Standards • Quantitative Methods • Economics • Financial Statement Analysis • Corporate Finance • Analysis of Equity Investments • Analysis of Debt Investments • Analysis of Derivatives • Analysis of Alternative Investments • Portfolio Management Investment Tools Asset Valuation
40% 40% 10% 10% The CFA Course of Study Three Levels – Topic Areas Approximate Percentage Breakdown Level I Level II Level III 50% 35% 5% 10% 50% 30% 15% 5% Investment Tools Asset Valuation Portfolio Management Professional Standards
Preparation for the CFA Exams Self-Study Materials
Preparation for the CFA Exams 2005 Level I Primary Textbooks Standards of Practice Handbook 8e (AIMR, 1999) Quantitative Methods for Investment Analysis 2e Defusco, McLeavey, Pinto, & Runkle (CFA Institute, 2004) Economics: Private and Public Choice 10e Gwartney, Stroup, Sobel, & Macpherson (South-Western, 2003) International Investments 5e Solnik & McLeavey (Addison Wesley, 2003) The Analysis and Use of Financial Statements 3e White, Sondhi, & Fried (Wiley, 2003) Fundamentals of Financial Management 8e Brigham & Houston (Dryden, 1998) Investment Analysis and Portfolio Management 7e Reilly & Brown (South-Western, 2003) Fixed Income Analysis for the CFA Program 2e Fabozzi (Frank J. Fabozzi Assoc., 2004) Analysis of Derivatives for the CFA Program Chance (AIMR, 2003)
Preparation for the CFA Exams Valuable Learning Experience
The CFA Examinations 2005 Exam Format * Beginning in 2005, Level II exams will be 100% item set. ● 50% ● 50% Level III ● 100% Level II* ● 100% Level I Constructed Response Item Set (Objective) Multiple Choice
The CFA Examinations Graded with Great Care • 750+ CFA charterholders in 2004 • Teams of practitioners • Rigorous and thorough process • Consistency and fairness across all papers
The CFA Examinations Historic Pass Rates Pass Rates: 2004 * Pass Rates: 1963-2004 * 34% 32% 64% 50% 52% 68% * Level I totals do not include results for the December 2004 exam.
Registering for the CFA Program Bachelor’s Degree Requirement Candidates’ Highest Degree 66% 31% 1% 2%
Registering for the CFA Program Three Ways to Register • Register online at: www.cfainstitute.org • Download forms from the CFA Institute website and register by mail • Contact CFA Institute for a paper CFA exam registration and enrollment package
Registering for the CFA Program CFA Charter Requirements • Sequentially pass Level I, II, and III exams • Have four years of acceptable work experience • Provide professional references (Level III) • Join CFA Institute as a member and apply for membership in a local CFA Institute society • Submit professional conduct statement
Registering for the CFA Program Connecting with a Local Society
Registering for the CFA Program 1st Year Program Costs – 2005 Approximate Costs for New Level I Candidates Registration fee to enter CFA Program US $375 Enrollment fee for Level I examination US $360 Study materials for Level I: • Study Guide Free • CFA Institute publications US $268 • Primary textbooks US $427 Approximate Total Costs for Level I US$1,430 * Registration & Enrollment by 1 st fee deadline. * *
Registering for the CFA Program Important Deadlines June 2005 Examinations (Levels I, II, & III) 15 September 2004 – Early registration deadline 15 February 2005 – Second deadline 15 March 2005 – Final deadline December 2005 Examinations (Level I only) 17 March 2005 – Early registration deadline 15 August 2005 – Second deadline 15 September 2005 – Final deadline
Scholarships for the CFA Program Three Scholarship Programs Student Scholarships – For New Level I Only * Awarded by CFA charterholder full-time faculty members Faculty Scholarships – Available for Any Level * Awarded to full-time faculty directly by CFA Institute Society Scholarships – Available for Any Level * Awarded to qualified candidates by local CFA Institute society * Registration fees waived – candidate pays US$150 for enrollment
Scholarships for the CFA Program Important Deadlines • Scholarship Applications 14 January 2005 – Faculty and society sponsors submit final list of scholars to Scholarship Office 31 January 2005 – Final Deadline: all forms received by CFA Institute • Scholarships apply to June 2005 exam only • No scholarships currently available for December 2005
More Information About the CFA Program www.cfainstitute.org The Americas P.O. Box 3668 Phone: 800-247-8132 or 434-951-5499 560 Ray C. Hunt Drive Fax: 434-951-5262 Charlottesville, VA 22903 E-mail: [email_address] USA Asia-Pacific Suite 3407 Phone: 852-2868-2700 or 852-8228-8820 Two Exchange Square Fax: 852-2868-9912 8 Connaught Place E-mail: [email_address] Central Hong Kong, SAR Europe 29th Floor Phone: 44-20-7712-1719 One Canada Square Fax: 44-20-7712-1601 Canary Wharf E-mail: [email_address] London E14 5DY United Kingdom
Chartered Financial Analyst ® A Symbol of Integrity and Professional Excellence ®